Amazon’s “Low Prices” Are a Mirage, New FTC Suit Reveals
Washington, D.C. — The Federal Trade Commission — along with 17 state attorneys general today filed a lawsuit against Amazon alleging that the company is an illegal monopoly that raises prices across the economy. In response, the American Economic Liberties Project released the following statement.
“The FTC is right to challenge Amazon, a company that appears to offer low prices under the guise of free shipping but in fact inflates prices across the whole economy,” said Matt Stoller, Director of Research at the American Economic Liberties Project. “In order to reach most online customers, sellers must sell through Amazon. This market power enables Amazon to set the price floor on almost every online retail item offered by sellers, extract a 50% cut from each sale, and punish sellers who try to sell elsewhere at lower prices. At the same time, it leverages its dominance to block rivals from entering the markets in which it offers services, while its own marketplace is increasingly saturated with pay-to-play junk ads. There’s no such thing as ‘free shipping’ just as there’s no such thing as a free lunch, Amazon is just hiding from consumers how much they have to pay. Amazon is a monopoly, and we’re thrilled to see the FTC end its coercive tactics.”
As the FTC’s complaint reveals, Amazon has a market share of 82% when compared to other potential online superstores. Amazon, eBay, Walmart and Target. This is just one of the many sectors Amazon plays a dominant role in. Amazon is a retailer, a marketplace, a logistics service, a warehouse, a cloud service, a healthcare provider, a grocer, an investor, and much more. Amazon wields this monopoly power to suppress its rivals’ ability to compete on price and then force fees of around 50% onto sellers, which are then passed onto consumers. Since Amazon is so big, sellers will do almost anything to maintain their place on its marketplace, including not lowering prices for their products on anywhere outside of the Amazon marketplace.
An Economic Liberties fact sheet reveals that as Amazon has become more dominant, it has consistently raised prices for its services. Most recently, Prime Membership increased from $119 to $139 in February 2022 (up from $99 in 2014). Amazon third-party seller fees have risen for six years in a row, squeezing their margins. But higher prices and merchant fees have not translated to better service for consumers. Amazon is also taking longer and longer to ship consumers their goods, with reports from May 2023 suggesting that Amazon has axed Prime 2 day shipping. Amazon also routinely pushes pay-to-play ads, instead of organic search results, onto consumers.
For some quick facts on Amazon’s market power, read our fact sheet.
Learn more about Economic Liberties here.
The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.